While that's really terrifying about Brazil, is it actually enforced? I can't really imagine there being a "Linux Police" kicking down the door of a hooded teenager and prying the Ubuntu DVD from his clammy hands.

I mean this is the country of favelas where even the police don't dare to enter.

No, but Brazil can (and did) exercise strict import controls over what kind of electronics can get into the country. For the longest time the only game consoles you could legitimately get in Brazil came from Sega through special arrangement with Brazilian manufacturer TecToy—in particular, the Master System and Mega Drive. When the market finally did open up, import consoles were subject to stiff tariffs. Piracy was rampant. That's why the Brazilian gaming market is... weird to this day, and until recently was generally avoided by major manufacturers creating openings for also-rans like the Zeebo.

So while police arresting a kid for having an Ubuntu DVD is unlikely, the Brazilian government twisting the arm of PC manufacturers to prevent the installation of any but approved operating systems on hardware sold to the Brazilian market is highly plausible. Since this already aligns with Microsoft's eventual goals, Microsoft and the PC manufacturers will just hasten the rollout of Palladium 2.0 and nothing will stop it.